Malignant Growth

When a health-care battle metastasizes

If you think the clash between UPMC and Highmark is aggravating, imagine how Gary Ebersole feels. For one thing, his son works for Highmark, his wife for UPMC. In this battle, he says, "I'm the most neutral person you can find."

And as a commissioner in rural Bedford County, Ebersole has a bigger problem: Many of his constituents -- and his public employees -- are insured by Highmark. But UPMC runs the county's only hospital.

"UPMC is here, and Highmark is here," he says. "And nobody is moving on either side."

The stalemate is the result of UPMC's decision to charge Highmark customers higher "out of network rates." The reason: Highmark is seeking to acquire the faltering West Penn Allegheny Health System, and while UPMC says it welcomes competition, it refuses to do business with what it now regards as a competitor.

Talk of competition might make sense in Pittsburgh, which has independent hospitals like St. Clair and Jefferson along with WPAHS. But it's a harder sell in places like Bedford, Sharon or Erie, which has two hospitals: St. Vincent and Hamot. UPMC acquired the latter this year -- just in time to drag Erie into its fight with Highmark.

"When Goliath has come in and bought David, it's never been a good thing for us," says Erie County Executive Barry Grossman. "This is a battle between Goliath and Goliath." And Erie shouldn't have to pick a side.

"Over the years, each hospital developed its own strengths," says Grossman. "It would be anathema for us to commit to one or another."

But while public officials are suffering palpitations now, they've long ignored the warning signs. Despite anti-trust laws, there's been little effort to rein in UPMC or Highmark's growth. (A key exception: In 2009, roadblocks set up by the Rendell Administration compelled Highmark to abandon a statewide merger.)

The result: A health-care market so dominated by leviathans that someday, even our blood banks may be too big to fail. And like some tiny European nation in 1914, places like Erie and Bedford may be dragged into a war they have little stake in, thanks to alliances that once seemed like a good idea.

That war has long been coming. Preparing for it is one reason UPMC got so big in the first place. Acquiring other hospitals gives nonprofits "much greater clout in bargaining with insurance companies," writes Jonathan Cohn in Sick, his book on modern health care. "If an insurer was not satisfied with the prices a hospital was offering, it could simply walk away [since] few patients would mind losing access to just one hospital." But as hospitals merged, "if an insurer walked out … it would be depriving its beneficiaries of access to many more hospitals."

Indeed, with the balance of power shifting to UPMC, Highmark wants hospitals of its own. And public officials are finally noticing that not all this growth has been benign.

"We've facilitated the creation of both of these behemoths," says state Sen. Jim Ferlo (D-Lawrenceville), a critic of both enterprises. "That which giveth can also taketh away."

State Rep. Dan Frankel (D-Squirrel Hill) agrees. True health-care competition, he says, would require not just bringing in new insurers -- a process already underway -- but "recreating UPMC facilities, which is a waste of resources." Frankel would prefer an "all-payer" bill, which would require hospitals to treat any qualified insurance plan the same way. There'd be no such thing as "out-of-network" rates; insurers would compete "on how efficient their customer-service is, and their overhead costs," says Frankel.

Imagine that: insurers competing on the basis of what they can offer -- not on the basis of what UPMC denies. But Frankel and Ferlo are Democrats in a Republican-controlled state. And Republicans generally prefer "letting the market decide": During a recent legislative hearing in Erie, state Sen. Don White (R-Indiana) opined that "our role in this [may be] even more limited than I thought."

But other Republicans -- like senators Jane Earll, of Erie, and Kim Ward, of Westmoreland County -- have expressed misgivings. Their constituents, after all, may have the most to lose. And one thing is obvious, all the way from Bedford County.

"I wish it would go back to the way it was," says Commissioner Ebersole, "but that will never be."